Small business owners sometimes ask us about the difference between bookkeeping and accounting. It’s a great question! Understanding the difference helps you to define your responsibilities versus your accountant’s. It may reveal how much support you may need from your accountant to get things right from the start.
So what is the difference between them?
Bookkeeping is the ongoing process of recording financial transactions such as sales, purchases or paying salaries in an organised way and storing the data. This results in accurate financial records. These records are the data that an accountant uses to ensure a business meets its compliance requirements and track the health of the business.
Accountants use the books and records to provide a number of key services including the production of accurate financial statements and determining taxes due. A good accountant offers more than the traditional compliance services. Their qualifications and experience make them best placed to shed light on the bigger picture. They can interpret data, provide insights and offer advice on systems, processes and the health of a growing business.
They provide a fresh set of eyes and act as a sounding board on all other business matters too. Small businesses find the alternative perspective incredibly valuable.
As a business grows and seeks funding for expansion, it is imperative to show that the business is in robust financial health with competent, responsible directors. Well-prepared financial and management accounts demonstrate this and shows that a business is ready to take on more debt to fund growth.
Accounting requires a greater level of expertise than book keeping – which isn’t surprising given its takes 3 years of study and exams as well as relevant work experience to qualify as a chartered accountant!
Should I be doing my own bookkeeping?
This depends on a few factors. Primarily, do you know how you do it yourself? And if you can, do you want to?
Starts ups and some more experienced small business owners may be able to take care of their own bookkeeping using well known software such as QuickBooks integrated with Receipt Bank. These apps help to streamline and simplify bookkeeping saving time. They’ll still need to work with a qualified accountant, who can advise on the most appropriate systems.
Other clients recognise that bookkeeping isn’t their skillset. Or they simply don’t want to do it themselves, so hand it over to us from the start. We manage their books and records on a monthly basis taking away hassle becoming an integral part of their team. It allows them to focus on the part so the business they do best and have peace of mind that their company books are in good hands.
Do we really need an accountant?
Yes! For most start-ups and small businesses hiring the right accountant is critical to confidently grow their business and adhere to numerous compliance obligations. The partnership with your accountant is a key collaboration to help you succeed.
If you want peace of mind that your bookkeeping and accounting are taken care of North Star Accounting can help. Get in touch.